Single-instance or multiple-instance CRM deployment -- Which is right for you?

Microsoft is planning to offer on-site, multi-tenant CRM hosting, and Gartner is predicting that companies will move between single- and multiple-instance CRM architectures.

Perhaps more than with any other application, enterprises find themselves running multiple instances of the same CRM application.

In fact, according to a recent research note from Stamford, Conn.-based Gartner Inc., just 30% of large-scale enterprises use single-instance CRM applications, which offer a lower total cost of ownership but bring regionalization challenges.

"That speaks to the requirements or demands of having to respond to customers in different ways," said Isher Kaila, research director with Gartner.

Whether to maintain one instance or multiple instances of a CRM application can be a difficult decision for large enterprises, even as they're dealing with mergers and acquisitions, far-flung operations, and varying CRM requirements within divisions.

It's a dilemma Microsoft is eyeing as well. At its Convergence conference last month, Brad Wilson, general manager for Dynamics CRM, said the company plans to provide multi-tenant CRM applications that can be housed on-site. Microsoft has for years been offering its CRM application through partner hosting. But its next version, code-named Titan, will be offered in a multi-tenant Software as a Service (SaaS) model housed in Microsoft's Live data centers. And Wilson said there's also an appetite for one company to run its own multi-tenant system.

  

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"I've talked to large accounts who say that's what we need," Wilson said last month in an interview with SearchCRM.com. "A lot of enterprises recognize the benefits of a reasonable amount of differentiation."

For example, Microsoft itself has very different sales processes and requirements between its Xbox division and its sales team selling enterprise applications.

Multiple instances of CRM hold a similar process flexibility advantage. In fact, Gartner predicts that by 2012, more than 60% of CRM deployments will still leverage multiple instances of CRM.

"We've seen an increasing pattern of that taking place," Kaila said. "It's more than just geographic. It's about different needs within [the] enterprise itself."

Multiple instances offer enhanced integration capabilities, improvements in custom user interfaces, a high degree of regional diversity and increased localization, according to Kaila.

"Sometimes with one single instance, enterprises aren't as responsive to local market conditions," he said. For example, in parts of Asia, it's not uncommon to mask certain types of data available to distributors and suppliers. "Other issues may be the look and feel of brand. What does a customer self-service portal look like and what's the expectation of a customer interacting with an organization. Those do have some cultural norms."

Single-instance deployments offer their own advantages, including a lower total cost of ownership, a single point of maintenance, streamlined update rollouts, a single source of truth, and a consistent user experience.

All of which leaves organizations with some decisions on how to proceed. By 2010, more than 80% of enterprises will make plans to migrate from a single instance to multiple instances or vice versa, according to Gartner.

Organizations need to take a detailed inventory of their current and proposed CRM processes and requirements, according to Kaila, differentiating between functional requirements that are "must have" and "nice to have."

In general, multiple-instance CRM deployments provide benefits to organizations with lots of process and workflow diversity between operating units, though too many instances can result in over-customized hubs that will be difficult to manage, Gartner warns. Single-instance deployments are generally more cost effective and do not preclude organizations from migrating to a multiple-instance deployment, but this approach becomes more difficult than migrating in the opposite direction.

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